ad pepper media International N.V.

Interim / Quarterly Report • Aug 21, 2018

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SECOND QUARTER

SELECTED GROUP KEY FIGURES

	H1 2018	H1 2017	Change	Q2 2018	Q2 2017	Change
	kEUR	kEUR	Percent	kEUR	kEUR	Percent
Consolidated sales	18,095	*33,796	-46.5	9,100	**17,428	-47.8
Gross profit	9,401	8,664	8.5	4,681	4,548	2.92
EBIT	439	301	45.8	208	650	-68.0
EBITDA	602	500	20.4	290	500	-42.0
Net income for period	348	18	>100.0	200	526	-61.9
Earnings per share in EUR (basic)	0.01	-0.01	<-100.0	0.01	0.02	-50.0

	6/30/2018	6/30/2017	Change
	kEUR	kEUR	Percent
Liquid funds***	20,759	18,404	12.8
Equity	16,666	15,375	8.4
Total assets	34,355	29,965	14.6
No. of employees	****215	188	14.4

*On a like-for-like basis, i.e. applying IFRS 15 to the equivalent period in the previous year, the Group's H1 2017 sales amounts to EUR 14,818k and grew by 22.1 percent.

**On a like-for-like basis, i.e. applying IFRS 15 to the equivalent period in the previous year, the Group's Q2 2017 sales amounts to EUR 7,684k.

***including securities

****Calculated on a full-time/actual working units basis.

CONTENTS

The ad pepper media Share	6
Interim Management Report	8
The Structure of the ad pepper media group	8
General Information about this Management Report	12
Macroeconomic Framework	13
Earnings, Financial and Net Asset Position	15
Research and Development Activities	17
Employees	17
Risk and Opportunity Report	18
Outlook	18
Responsibility Statement	18
Interim Consolidated Financial Statements	20
Consolidated Income Statement (IFRS)	20
Consolidated Statement of Comprehensive Income (IFRS)	22
Consolidated Balance Sheet (IFRS)	26
Consolidated Statement of Cash Flows (IFRS)	30
Consolidated Statement of Changes in Equity (IFRS)	34
Selected Explanatory Notes	38
Additional Information	54
Financial Calendar	54
Investor Contact	54

Imprint 55

KEY FIGURES AT A GLANCE

Key data about ad pepper media share
Security Identification Number (WKN)		940883
ISIN		NL0000238145
Type of share		Ordinary bearer shares
Stock market segment (Frankfurt Stock Exchange)		Prime Standard
Initial public offering		October 9, 2000
Designated Sponsor		Equinet
Capital stock (EUR)	1,150,000
No. of shares	23,000,000
Sector		Advertising
Key share figures	H1	H1
	2018	2017
XETRA closing price
at end of period (EUR)	3.65	2.06
Highest price (EUR)	4.41	2.61
Lowest price (EUR)	3.30	1.91
Market capitalization
at end of period (EUR)	84.0m	47.4m
Average no. of shares
traded (XETRA) per day	14,436	11,667
Earnings per share (basic) (EUR)	0.01	-0.01
Net cash per share* (EUR)	0.99	0.88

Shareholder structure as of 6/30/2018	shares	shareholding
	Numbers	Percent
EMA B.V.	9,486,402	41.25
Treasury stock	1,999,292	8.69
Axxion S.A.	1,163,501	5.06
Dieter Koppitz	699,338	3.04
Euro Serve Media GmbH	456,163	1.98
Subtotal	13,804,696	60.02
Free float	9,195,304	39.98
Total	23,000,000	100.00

Share price performance over the past twelve months (Xetra)

THE STRUCTURE OF THE AD PEPPER MEDIA GROUP

ad pepper media International N.V. is the Holding Company of one of the leading international performance marketing groups. It was founded in 1999 and, thus, is one of the pioneers in the business of online marketing. With eight offices in four European countries and the U.S., the ad pepper media group globally develops performance marketing solutions for customers.

The Group combines its business into three reporting segments that work in close cooperation with the Holding Company and operate independently on the market: ad pepper media (lead generation and audience targeting), ad agents (full service agency), and Webgains (affiliate network). In the course of the central overall governance of the Group, the Holding (admin) takes responsibility for the know-how transfer between the segments, the strategic focus, as well as financing and liquidity. A total of 215 employees work in the three business units and the Group's Holding Company.

The segments of the ad pepper media group

ad pepper media

The Group's success story began with ad pepper media in 1999. As a leading performance marketing company, it specialises in lead generation and targeting specific audiences. ad pepper media works together with its customers to develop online marketing strategies for over 50 countries worldwide.

ad pepper media also applies the latest technologies to each project. Whether at local, national or international level, ad pepper media helps customers meet their goals by developing the most efficient online marketing strategies for their budget. By taking local conditions into consideration, ad pepper media is able to optimise campaigns for the target markets. Whether they are working with an agency or a direct customer, their aim is always the same: to deliver the best possible results for customers.

What makes ad pepper media different from competitors? Many years of experience – and iLead. This unique platform enables them to generate customised campaigns that are adapted to their customers' markets in next to no time. And ad pepper media designed the platform by themselves. So far, they have used iLead to successfully launch and manage over 30,000 campaigns worldwide and generate millions of qualified leads.

Offices: Nuremberg / Madrid

Webgains

A network is only as strong as its members. Thanks to Webgains' partnerships with over 250,000 publishers, their customers have access to one of the world's leading high-performance affiliate marketing networks – for the largest reach possible. What is more, Webgains' experienced acquisitions team works to sign up new high-quality publishers on an ongoing basis. Webgains joined the ad pepper media group in 2006. Today, over 2,000 customers in 14 countries – from startups to global players – rely on Webgains' services. When it comes to designing local and international campaigns, Webgains not only benefits from its strong publisher network but also the extensive experience of over 100 highly motivated experts with excellent knowledge of global markets – not to mention the most innovative tools.

Their current business development strategy focuses on artificial intelligence and machine learning. High-tech advances make it easy to quickly roll out scalable international campaigns. Meanwhile, customers can count on outstanding data security at all times and benefit from near real-time performance reporting. As well as being committed to the ongoing development of its tools, Webgains supports its employees' professional development at the Company's integrated Webgains Academy. Everything they do is designed to turn Webgains' customers into market leaders and maximise their sales. In short, their teams always give their all.

Offices: Nuremberg / Munich / Madrid / Bristol / London / New York / Paris

ad agents

ad agents joined the ad pepper media group in 2007. Today it is one of Germany's most successful performance marketing agencies – and for a good reason. Their strategies are as unique as their personalised advice and support services. They are always optimised to suit the situation and specific requirements of ad agents' customers. They maintain an overview of the entire digital advertising market and adapt their comprehensive service portfolio accordingly.

Concept, management and optimisation: these factors are crucial for delivering an efficient marketing and sales solution. ad agents performance marketing experts always find the perfect strategy for increasing their customers' profiles and turnover – across all digital channels and on all devices. Customers benefit from ad agents' sixth sense for trends, their extensive experience and transparent reporting. For years, national and international companies from virtually every industry have relied on ad agents for their digital marketing activities. Why? Because their campaigns deliver outstanding results. Exceptional quality always pays off: ad agents is a certified Google Premier Partner, and in 2017 they once again received numerous forms of quality certification from the German Digital Industry Association (BVDW).

Offices: Herrenberg

GENERAL INFORMATION ABOUT THIS MANAGEMENT REPORT

Definitions

All mentions of "ad pepper media International N.V.", "ad pepper media group" or the "Group" in this management report relate to the ad pepper media group.

Forward-looking statements

This management report contains forward-looking statements and information based on the beliefs of and assumptions made by our management using information currently available to them. We have based these forward-looking statements on our current expectations, assumptions, and projections about future conditions and events. As a result, our forward-looking statements and information are subject to uncertainties and risks, many of which are beyond our control. If one or more of these uncertainties or risks materialises, or if the management's underlying assumptions prove incorrect, our actual results could differ materially from those described in or inferred from our forward-looking statements and information. We describe these risks and uncertainties in the risk report of our Annual Report 2017.

The words "aim", "anticipate", "assume", "believe", "continue", "could", "counting on", "is confident", "estimate", "expect", "forecast", "guidance", "intend", "may", "might", "outlook", "plan", "project", "predict", "seek", "should", "strategy", "want", "will", "would", and similar expressions as they relate to us are intended to identify such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date specified or the date of this report. Unless we are required to do so by law, we accept no obligation to publicly update or revise any forward-looking statements due to new information, changed conditions, or any other future events which had not existed before the issuance of this report.

Internal control system

Revenue and profits (EBIT, EBITDA, gross profit) are some of the parameters which the ad pepper media group analyzes monthly and compares with the original business plan to control and monitor the development of individual subsidiaries. In addition, further key performance indicators are calculated each month for control purposes and are used within all the operating companies of the ad pepper media group. External indicators are also regularly analyzed for company management purposes. In addition, there are weekly scheduled jour fixes as well as regular shareholder meetings with the individual subsidiaries.

MACROECONOMIC FRAMEWORK

Germany/Europe/World

ad pepper media's core markets: Eurozone, UK and USA

According to a recent forecast published by Organisation for Economic Cooperation and Development (OECD), economic growth in the euro area is set to continue at a relatively dynamic pace of just above 2 percent over 2018-19. Accommodative monetary policy, fiscal support and improving labour markets are supporting domestic demand, notably through dynamic private consumption. Investment is strengthening, on the back of favourable financing conditions, strong global demand and the need to expand capacity. Inflation is expected to strengthen gradually, as slack disappears.

In the United Kingdom, according to the same forecast, economic growth is projected to remain modest at 1.4 percent in 2018 and 1.3 percent in 2019, owing to high uncertainties about the outcome of Brexit negotiations. There is little slack in the economy following years of strong growth, and unemployment is projected to remain below 5 percent. Inflation is projected to fall gradually to slightly above the 2 percent target of the central bank by the end of 2019.

In the United States, economic growth is strengthening to about 3 percent largely due to a substantial fiscal boost. Employment growth remains robust, which, coupled with buoyant asset prices and strong consumer confidence, is sustaining income and consumption growth. Business investment is projected to strengthen as a result of major tax reform and supportive financial conditions. A pick-up in the world economy is underpinning export growth, although tensions have emerged on how best to reduce barriers to trade.

Source: http://www.oecd.org/eco/outlook/economic-outlook/

Advertising market

Online advertising market

In 2017, for the first time global spending on digital advertising exceeded spending on TV advertising. In terms of numbers: Digital ad spending reached USD 209 billion, which corresponds to 41 percent of the worldwide market, while spending for TV accumulated to USD 178 billion, equaling 35 percent of the global market. However, traditional TV ad spending was still slowly growing in 2017. For 2018, MAGNA predicts that digital ad spending will keep growing strongly by 13 percent to USD 237 billion while TV ads are forecasted to further grow moderately by 2.5 percent to USD 183 billion. One-off events like the Winter Olympics in South Korea, the football World Cup in Russia, or the mid-term elections in the USA are expected to positively influence these developments.

Source: MAGNA (part of the IPG Mediabrands Network)

EARNINGS, FINANCIAL AND NET ASSET POSITION

Earnings position

ad pepper media International N.V. generated sales of EUR 18,095k in the first six months of 2018. On a like-for-like basis, the Group's sales growth thus amounted to 22.1 percent (H1 2017: EUR 14,818k). ad pepper media, the performance agency specializing in lead generation and audience targeting, once again posted the most dynamic business performance. This segment boosted its first-half sales by 56.1 percent to EUR 5,011k (H1 2017: EUR 3,209k). The performance marketing agency ad agents continued to build successfully on Amazon services and increased its sales by 22.0 percent to EUR 8,512k (H1 2017: EUR 6,979k). Lower advertising spending in the past quarter, which was largely due to one key customer, led to slightly lower sales in our affiliate network Webgains (on a like-for-like basis) of EUR -57k, or -1.2 percent (currency-adjusted: +1.9 percent).

The Group's gross margin rose by EUR 737k to EUR 9,401k, or 8.5 percent in the first half of 2018. The ad pepper media segment reported particularly dynamic growth of EUR 619k (+39.5 percent), while ad agents posted an increase of EUR 164k in its gross margin (+6.9 percent). With EUR -118k, or -2.6 percent, the gross margin in the Webgains segment declined slightly (currency-adjusted: +0.3 percent).

Due in particular to higher employment costs, the Group's operating expenses rose to EUR 8,962k (H1 2017: EUR 8,363k). The ad pepper media group had a total of 217 employees, 29 more than at the previous year's reporting date.

With EBITDA of EUR 602k, the Group increased this key earnings figure by 20.4 percent compared with the previous year (H1 2017: EUR 500k). Segment EBITDAs amounted to EUR 155k at ad agents (H1 2017: EUR 462k) and to EUR 169k at Webgains (H1 2017: EUR 396k). ad pepper media generated EBITDA of EUR 1,010k (H1 2017: EUR 657k), the highest earnings ever posted by this segment.

Financial position

The gross cash flow H1 2018 amounted to EUR 563k (H1 2017: EUR 223k), while a figure of EUR -1,664k was reported for the cash flow from operations, as against EUR -1,282k for the first six months of 2017. The key factor driving the outflow of cash for operating activities is the reductions in accrued liabilities for affiliate credits not yet disbursed in the Webgains segment. In the second quarter 2018, the Group reported an operating cash inflow of EUR 1,661k, which is a significant increase compared to the high outflow reported in the first quarter (Q1 2018: EUR 3,324k), which was particularly driven by higher VAT payments in conjuction with the strong Q4 2017 business.

Cash inflow for investing activities amounted to EUR 26k (H1 2017: EUR -254k) and consists of net cash inflow of EUR 64k resulting from an investment made in the first half year 2018, partly compensated by investments made in fixed assets (EUR 38k).

Cash flow from financing activities amounted to EUR -214k in the first six months of 2018 (H1 2017: EUR -318k) and shows cash paid to non-controlling interests.

Net asset position

Total assets reduced by EUR 4,260k to EUR 34,355k compared with December 31, 2017. The decrease was due to lower trade receivables, which fell by EUR 2,557k to EUR 11,572k at the end of the second quarter 2018, and corresponding reductions in trade payables by EUR 3,501k. Liquid funds (including securities) decreased to EUR 20,759k, down by EUR 1,883k compared with December 31, 2017 (EUR 22,642k). Other payables reduced from EUR 2,529 as of December 31, 2017 to EUR 1,600k, which is particularly due to lower sales tax liabilities.

Other financial liabilities decreased from EUR 1,150k as of December 31, 2017 to EUR 982k. This is mainly due to performance-linked payments made in the first quarter 2018. The impact however was partly compensated by increasing accrued liabilities for outstanding invoices. Other long-term liabilities amount to EUR 191k (December 31, 2017: EUR 217k) and relate mainly to accrued rental benefits. Total liabilities amount to EUR 17,689k (December 31, 2017: EUR 22,098k). The Group still does not have any liabilities to banks. Total equity remained at EUR 16,666k (December 31, 2017: EUR 16,517k). The equity ratio increased to 48.5 percent (December 31, 2017: 42.8 percent).

RESEARCH AND DEVELOPMENT ACTIVITIES

Research and development activities in the Webgains segment are performed on a decentralized basis at Webgains Ltd. Development work for administration departments and the ad pepper media segment is directly managed by ad pepper media International N.V. Across all segments, the companies work either with in-house development resources or obtain additional support by commissioning external service providers.

EMPLOYEES

As of June 30, 2018, the ad pepper media group had 215 employees, as against a total of 188 employees at the end of the equivalent period in the previous year. The workforce of the ad pepper media group is assigned to the following segments:

	6/30/2018	6/30/2017
	Number	Number
ad pepper media	21	21
Webgains	106	93
ad agents	76	62
Administration	12	12

RISK AND OPPORTUNITY REPORT

There have been no material changes in the opportunity and risk situation of ad pepper media International N.V. compared with the information provided in the Annual Report as of December 31, 2017. Reference is therefore made to the information presented in the management report for the 2017 financial year.

OUTLOOK

As announced on March 29, 2018, we expect to achieve an EBITDA higher than in the previous business year achieved. While we experienced a good first halfyear already, we expect the remainder of the year to be stronger, both in terms of revenue and EBITDA, in-line with dynamics seen in previous years.

RESPONSIBILITY STATEMENT

To the best of our knowledge, and in accordance with the applicable accounting principles, the Interim Consolidated Financial Statements give a true and fair view of the assets, liabilities, financial position, and profit or loss of the Group, while the Interim Group Management Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group.

Nuremberg, August 6, 2018 ad pepper media International N.V.

Dr. Jens Körner, CEO

CONSOLIDATED INCOME STATEMENT (IFRS)

	Q2 2018	Q2 2017	H1 2018	H1 2017
	kEUR	kEUR	kEUR	kEUR
Revenue	9,100	17,428	18,095	33,796
Cost of sales	-4,419	-12,881	-8,695	-25,132
Gross profit	4,681	4,548	9,401	8,664
Selling and marketing expenses	-3,092	-2,603	-6,006	-5,037
General and administrative expenses	-1,433	-1,534	-2,994	-3,492
Other operating income	112	289	258	367
Other operating expenses	-59	-49	-220	-200
Operating profit	208	650	439	301
Financial income	78	6	86	12
Financial expenses	-24	-16	-31	-19
Income/loss before taxes	263	641	494	294
Income taxes	-63	-114	-147	-275
Net income/loss	200	526	348	18
Attributable to shareholders of the parent company	137	414	202	-182
Attributable to non-controlling interests	63	112	146	200
Basic earnings per share on net income for the year attributable to shareholders of the parent company (EUR)	0.01	0.02	0.01	-0.01
Diluted earnings per share on net income for the year attributable to shareholders of the parent company (EUR)	0.01	0.02	0.01	-0.01
	No. of shares	No. of shares	No. of shares	No. of shares
Weighted average number of shares outstanding (basic)	21,000,708	20,918,486	21,000,708	20,902,862
Weighted average number of shares outstanding (diluted)	21,350,775	21,078,317	21,353,211	21,115,405

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (IFRS)

	Q2 2018	Q2 2017	H1 2018	H1 2017
	kEUR	kEUR	kEUR	kEUR
Net income/loss	200	526	348	18
Other comprehensive income Items that may be reclassified subsequently to profit or loss:
Currency translation differences	-13	-14	10	-31
Revaluation of securities at fair value through other comprehensive income	-182	239	-40	696
Other comprehensive income	-195	225	-30	665
Total comprehensive income	5	751	318	683
Attributable to non-controlling interests	63	112	202	-182
Attributable to shareholders of the parent company	-58	639	116	865

Disclosures on other comprehensive income

The total other comprehensive income recognized directly in equity and the corresponding income taxes presents itself as follows:

			Q2 2018			Q2 2017			H1 2018			H1 2017
			kEUR			kEUR			kEUR			kEUR
	before income taxes	income taxes	after income taxes	before income taxes	income taxes	after income taxes	before income taxes	income taxes	after income taxes	before income taxes	income taxes	after income taxes
Currency translation differences	-13	0	-13	-14	0	-14	10	0	10	-31	0	-31
Revaluation of securities at fair value
through other comprehensive income	-182	0	-182	239	0	239	-40	0	-40	696	0	696
Total other comprehensive income	-195	0	-195	225	0	225	-30	0	-30	665	0	665

CONSOLIDATED BALANCE SHEET (IFRS) – ASSETS

	6/30/2018	12/31/2017
	kEUR	kEUR
Non-current assets
Intangible assets	289	362
Property, plant, and equipment	389	424
Securities "fair value through other comprehensive income"	2,475	2,515
Other financial assets	431	418
Total non-current assets	3,583	3,719
Current assets
Trade receivables	11,572	14,129
Other receivables	482	410
Income tax receivables	393	203
Other financial assets	41	27
Cash and cash equivalents	18,285	20,127
Total current assets	30,772	34,896
Total assets	34,355	38,615

CONSOLIDATED BALANCE SHEET (IFRS) – EQUITY AND LIABILITIES

	6/30/2018	12/31/2017
	kEUR	kEUR
Equity attributable to shareholders of the parent company
Issued capital*	1,150	1,150
Reserves	61,358	61,312
Accumulated deficit	-44,839	-45,041
Other reserves	-1,714	-1,683
Total	15,955	15,738
Non-controlling interests	711	779
Total equity	16,666	16,517
Non-current liabilities
Deferred tax liabilities	186	185
Other long-term liabilities	191	217
Total non-current liabilities	377	402
Current liabilities
Trade payables	14,337	17,838
Other liabilities	1,600	2,529
Other financial liabilities	983	1,150
Income tax liabilities	392	179
Total current liabilities	17,312	21,696
Total liabilities	17,689	22,098
Total equity and liabilities	34,356	38,615

* The issued capital consists of shares with a nominal value of EUR 0.05 each. The authorized capital amounts to 23,429,708 shares, of which 23,000,000 are issued and 21,000,708 shares were floating on June 30, 2018 (December 31, 2017: 20,880,708).

CONSOLIDATED STATEMENT OF CASH FLOWS (IFRS) – 1/ 2

	H1 2018	H1 2017
	kEUR	kEUR
Net income	348	18
Adjustments for:
Depreciation and amortization	163	199
Gain/loss on sale of fixed assets	0	-2
Share-based compensation	46	30
Gain/loss on sale of securities (after bank charges)	-49	0
Other financial income and financial expenses	-6	7
Income taxes	147	275
Other non-cash expenses and income	-86	-304
Gross cash flow	563	223
Change in trade receivables	2,374	672
Change in other assets	-116	-67
Change in trade payables	-3,296	-498
Change in other liabilities	-1,074	-1,077
Income tax received	74	0
Income tax paid	-195	-542
Interest received	45	7
Interest paid	-39	0
Net cash flow from/used in operating activities	-1,664	-1,282
Purchase of intangible assets and property, plant, and equipment	-38	-256
Proceeds from sale of intangible assets and property, plant, and equipment	0	2
Proceeds from sale of securities	2,480	0
Purchase of securities	-2,416	0
Net cash flow from/used in investing activities	26	-254

CONSOLIDATED STATEMENT OF CASH FLOWS (IFRS) – 2/ 2

	H1 2018	H1 2017
	kEUR	kEUR
Issuance of own shares	0	34
Dividends to non-controlling interests	-214	-352
Net cash flow from/used in financing activities	-214	-318
Net decrease/increase in cash and cash equivalents	-1,852	-1,854
Cash and cash equivalents at beginning of period	20,127	17,859
Effect of exchange rates on cash and cash equivalents	10	-31
Cash and cash equivalents at end of period	18,285	15,974

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (IFRS)

	Balance on 1/1/2018	Total compre hensive income	Share-based payment	Issuance of shares	Dividends	Balance on 6/30/2018
Issued capital
Number of shares	23,000,000					23,000,000
Issued capital (kEUR)	1,150					1,150
Reserves
For employee stock option plans (kEUR)	2,746		47			2,793
From contributions of shareholders of the parent company (kEUR)	63,782					63,782
Treasury shares
Number of shares	1,999,292					1,999,292
Treasury shares at cost (kEUR)	-5,217					-5,217
Accumulated deficit (kEUR)	-45,041	202				-44,839
Other reserves
Currency translation differences (kEUR)	-1,196	10				-1,186
Unrealized gains/(losses) from securities at fair value through other comprehensive income (kEUR)	-487	-40				-528
Equity attributable to shareholders of
ad pepper media International N.V. (kEUR)	15,738	172	47	0	0	15,955
Non-controlling interests (kEUR)	779	146	0	0	-214	711
Total equity (kEUR)	16,517	318	47	0	-214	16,666

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (IFRS)

	Balance on 1/1/2017	Total	Share-based	Issuance of	Dividends	Balance on
		compre hensive	payment	shares		6/30/2017
		income
Issued capital
Number of shares	23,000,000					23,000,000
Issued capital (kEUR)	1,150					1,150
Reserves
For employee stock option plans (kEUR)	2,656		30			2,686
From contributions of shareholders
of the parent company (kEUR)	63,782					63,782
Treasury shares
Number of shares	2,119,292			-40,000		2,079,292
Treasury shares at cost (kEUR)	-5,322			34		-5,288
Accumulated deficit (kEUR)	-45,621	-182				-45,803
Other reserves
Currency translation differences (kEUR)	-1,157	-31				-1,188
Unrealized gains/(losses) from securities at fair value through other
comprehensive income (kEUR)	-1,200	696				-504
Equity attributable to shareholders of ad pepper media International N.V.
(kEUR)	14,289	483	30	34	0	14,836
Non-controlling interests (kEUR)	690	200	0	0	-352	538
Total equity (kEUR)	14,979	683	30	34	-352	15,375

SELECTED EXPLANATORY NOTES

Consolidated segment information (IFRS)

H1 2018	ad pepper media	Webgains	ad agents	admin	Intersegment elimination	Group
	kEUR	kEUR	kEUR	kEUR	kEUR	kEUR
Revenue	5,013	4,573	8,512	200	-203	18,095
Thereof external	5,011	4,572	8,512	-	-	18,095
Thereof intersegment	3	-	-	200	-203	-
Gross profit	2,192	4,472	2,539	201	-3	9,401
Expenses and other income	-4,005	-4,520	-8,373	-959	200	-17,656
Thereof depreciation and amortization	-5	-117	-16	-26	-	-163
Thereof other non-cash income	6	191	-	-7	-	290
Thereof other non-cash expenses	-1	-203	-	-46	-	250
EBITDA	1,013	170	155	-733	-3	602
EBIT	1,008	53	139	-758	-3	439
Financial income	-	1	-	85	-	86
Financial expenses	-1	-2	1	-27	-	-31
Income taxes						-147
Net income for the period						348

Consolidated segment information (IFRS)

ad pepper	Webgains	ad agents	admin	Intersegment	Group
kEUR	kEUR	kEUR	kEUR	kEUR	kEUR
3,269	*23,608	6,979	128	-188	**33,796
3,209	23,607	6,979	-	-	33,796
60	1	-	128	-189	-
-2,560	-23,310	-6,537	-1,216	128	-33,495
-8	-99	-20	-72	-	-199
71	342	3	17	-	432
-55	-92	-	-32	-	-179
716	397	462	-1,016	-60	500
708	298	443	-1,087	-60	301
2	1	-	9	-	12
-1	-1	-1	-16	-	-19
					-275
					18
	media				elimination

*On a like-for-like basis, i.e. applying IFRS 15 to the equivalent period in the previous year, Webgains' Q2 2017 sales amount to EUR 4,629k.

** On a like-for-like basis, i.e. applying IFRS 15 to the equivalent period in the previous year, the Group's Q2 2017 sales amount to EUR 14,818k.

1. Basis for the preparation of the Interim Financial Statements

The current Condensed Interim Consolidated Financial Statements of ad pepper media International N.V. were prepared according to the provisions of the International Financial Reporting Standards (IFRS) as applicable on the closing date, and are presented in euros (EUR). The comparative figures from the previous year were determined according to the same principles and adjusted where necessary. The half year financial statements meet the requirements of IAS 34. The condensed consolidated interim financial statements do not include all of the information required for the full annual financial statements and should therefore be read in conjunction with the consolidated Annual Report for the year ended December 31, 2017.

The consolidated interim financial statements as of June 30, 2018 were authorized for issue by the Board of Directors on August 6, 2018.

2. Accounting principles

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended December 31, 2017 except for the adoption of new standards effective as of January 1, 2018. The Group has not adopted early any other standard, interpretation or amendment that has been issued but is not yet effective.

The Group applies, for the first time, IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments. As required by IAS 34, the nature and effect of these changes are disclosed below.

Several other amendments and interpretations apply for the first time in 2018, but do not have an impact on the interim condensed consolidated financial statements of the Group.

In May 2014, the IASB issued IFRS 15. The new standard describes when and in which amount revenues require recognition, and also lays down the necessary disclosure notes. Revenues are calculated on the basis of a five-stage model applicable to all contracts with customers. The Company adopted IFRS 15 for the financial year beginning as of January 1, 2018, which had an impact in particular on contracts that can give rise to a new classification, whether a principal or agent activity exists. Thus, for each separate performance obligation it was examined whether these are controlled prior to transfer to the customer. As supportive indicators, only the primary responsibility for provision of the service, the inventory risk as well as the pricing competency is to be taken into account in the assessment. Any potentially existing default risk should be disregarded. Taking into account the newly introduced control principle as well as the modified indicators, the contractual relationships of our Webgains business model are accounted for as agent relationships from 2018 onwards. As a result of this change, revenues and cost of sales of the Webgains segment decrease.

With respect to the comparative period 2017, application of the new regulations would result in a reduction of revenues and material expenses of EUR 19m. This would correspond to a decline in sales in the Webgains segment of around 80 percent. Our Group performance figures, adjusted EBITDA and adjusted EBIT, as well as the balance sheet disclosure are not affected.

As required for the condensed interim financial statements, the Group disaggregated revenue recognized from contracts with customers into categories. The Group also disclosed information about the relationship between the disclosure of disaggregated revenue and revenue information disclosed for each reportable segment. Refer to Note 4 for the disclosure on disaggregated revenue.

In July 2014, the IASB issued IFRS 9. The new standard introduces a single approach for the classification and measurement of financial assets according to their cash flow characteristics and the business model they are managed in, and provides a new impairment model based on expected credit losses (ECL method).

The Company adopted IFRS 9 for the fiscal year beginning as of January 1, 2018. The new classification and measurement of the Group's financial assets are as follows:

• Debt instruments at amortised cost for financial assets that are held within a business model with the objective to hold the financial asstes in order to collect contractual cash flows. This category includes the Group's Trade and other receivables.
• Debt instruments at FVOCI, with gains or losses recycled to profit or loss on derecognition. Financial assets in this category are the Groups quoted debt instruments that are held within a business model both to collect cash flows and to sell. Under IAS 39, the Group's quoted debt instruments were classified as available-for-sale (AFS) financial assets.

For trade account receivables, the Company will make application of the simplified approach set out in the ECL model. Based on its current assessment, the Company does not have to increase its credit provisioning.

3. Consolidated Group

The entities included in consolidation are as follows:

Entity	6/30/2018	6/30/2017
	Percent	Percent
ad pepper media GmbH, Nuremberg, Germany	100	100
ad pepper media France S.A.R.L., Paris, France	100	100
ad pepper media Spain S.A., Madrid, Spain	65	65
ad pepper media USA LLC, New York, USA	100	100
Webgains Ltd, London, United Kingdom	100	100
ad agents GmbH, Herrenberg, Germany	60	60

4. Notes to the Interim Financial Statements

4.1. Revenue from contracts with customers

Set out below is the disaggregation of the Group's revenue from the contracts with customers:

For the three months ended June 30, 2018
Segments	ad pepper media	Webgains	ad agents	Total
Geographical markets
Germany	2,809	1,080	8,512	12,401
United Kingdom	-	2,558	-	2,558
Spain	2,201	273	-	2,474
USA	-	518	-	518
Other	-	143	-	143
Total revenue	5,010	4,572	8,512	18,095

For the three months ended June 30, 2017
Segments	ad pepper media	Webgains	ad agents	Total
Geographical markets
Germany	1,788	804	6,979	9,571
United Kingdom	-	2,912	-	2,912
Spain	1,421	267	-	1,688
USA	-	524	-	524
Other	-	123	-	123
Total revenue	3,209	4,630	6,979	14,818

Regarding results of operations, financial position and net assets, reference is made to the comments in the Interim Management Report.

The following one-off items affecting the income statement occurred in the period under review:

Selling and marketing expenses increased in the first half year 2018 by EUR 969k respectively 19.2 percent compared to the equivalent prior year's period. This is particularly due to investments done in the segments ad agents and Webgains and correspondingly higher employment costs in both segments. Stronger marketing and sales activities within the segments ad pepper media and Webgains contributed also to the increase in costs.

Other operating income mainly includes income of EUR 186k (H1 2017: EUR 197k) from reversals of non-disbursed affiliate credits in the Webgains segment that are classified by ad pepper media group as not being likely to be paid out.

Other operating expenses for the first half year of 2018 largely comprise writedowns of receivables of EUR 181k (H1 2017: EUR 138k). Net foreign exchange losses amount to EUR 34k, the same amount was posted in the equivalent prior year's period.

The following one-off items affecting the balance sheet occurred in the period under review:

Other payables reduced by EUR 929k compared with December 31, 2017. This was mainly due to lower sales tax liabilities. The reduction in other financial liabilities by EUR 167k to EUR 983k was due in particular to the payment of variable compensation in the first quarter 2018.

5. Segment reporting according to IFRS 8

IFRS 8 requires an entity to report financial and descriptive information about its so-called "reportable segments". Reportable segments are either operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker for the purpose of resource allocation and assessing performance.

Generally, financial information is required to be reported on the same basis as used internally to evaluate the operating segments (management approach). The information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance is focused on the category of services delivered. For this reason, the Group reports segment information for the operating segments of ad pepper media" (lead generation, audience targeting), "Webgains" (affiliate network), "ad agents" (full service agency), and for the non-operating "admin" (administration) segment. The accounting policies of the reportable segments correspond to the Group's accounting policies described in note [2] of the consolidated Annual Report for the year ended December 31, 2017.

The segment result is measured by EBIT and EBITDA for each segment without differences to IFRS. The segment result thus calculated is reported to the chief operating decision maker for the purpose of resource allocation and assessing segment performance.

The "dealing at arm's length" principle forms the basis of accounting for intersegment transaction.

Geographical information

The Group operates in four principal geographical areas – Germany, Spain, United Kingdom, and the US.

Information about the segments' assets are detailed below according to geographical location. Long-term assets do not include financial instruments or deferred tax assets:

		Non-current assets
	6/30/18	6/30/17
	kEUR	kEUR
Germany	187	211
United Kingdom	472	592
Spain	13	17
USA	3	5
Other	3	3
Total	678	828

Revenues of EUR 2,141k (H1 2017: EUR 1,968k) are derived from one single external customer, which is the only client whose transactions represent more than 10 percent of the Group revenues. These revenues are attributable to the ad agents segment.

6. Treasury stock

Acquisition of treasury stock

By a shareholders' resolution dated May 16, 2017, the Board of Directors was authorized to repurchase treasury stock of up to 50 percent of the issued capital within the following 18 months.

As of June 30, 2018, ad pepper media International N.V. held 1,999,292 treasury stocks (June 30, 2017: 2,079,292) at a nominal value of EUR 0.05 each, corresponding to 8.7 percent (June 30, 2017: 9.04 percent) of the share capital. According to a shareholders' resolution, these shares can be used for stock option plans or acquisitions.

Sale of treasury stock

No treasury shares were sold during the first six months of 2018 (H1 2017: 0). No shares were sold under the employee stock option plans and no cash settlements amounting for fully vested stock options occurred (H1 2017: 40,000 shares sold under employee stock option plans).

Number of shares outstanding

The number of shares issued and outstanding as of June 30, 2018 totals 21,000,708 (June 30, 2017: 20,920,708). Each share has a nominal value of EUR 0.05.

7. Seasonal influences on business operations

The ad pepper media group is engaged in the field of online advertising in the broadest sense. Due to the seasonal character of the advertising industry, with its traditional focus on expenditure in the fourth quarter, revenue and, thus, operating profit are generally higher in the second half of the year.

8. Stock options and shareholdings

As of June 30, 2018, a total of 639,400 stock options exist under stock option plans. The exchange ratio for each of the stock options is one share per option. The exercise prices are in the range of EUR 0.665 to EUR 3.795.

The following table lists the individual holdings and option rights of the Supervisory and Board of Directors (directly and indirectly) as well as employees.

	Shares	Options
	as of	as of
	6/30/2018	6/30/2018
Board of Directors
Dr. Jens Körner		300,000
Former Board of Directors		172,000
Supervisory Board
Michael Oschmann		-
Thomas Bauer		10,000
Eun-Kyung Park		10,000
Dr. Stephan Roppel		10,000
Employees		137,400
Associated companies
EMA B.V.	9,486,402
Euro Serve Media GmbH	456,163

9. Report on major transactions with related companies and persons

There have been no material changes in transactions with related parties compared with the 2017 financial year.

10. Events after the balance sheet date

Up until the day of authorization for issuance, no events took place which would have exerted substantial influence on the net assets, financial position, or result of operations as per June 30, 2018.

Nuremberg, August 6, 2018 ad pepper media International N.V.

Dr. Jens Körner, CEO

FINANCIAL CALENDAR

All financial and press dates relevant for the capital market at a glance:

Quarterly Report III / 2018 November 15, 2018

INVESTOR CONTACT

Dr. Jens Körner (CEO) ad pepper media International N.V. Frankenstraße 150 C D-90461 Nuremberg

Phone: +49 (0) 911 929057-0 Fax: +49 (0) 911 929057-157 E-mail: ir@adpepper.com

www.adpeppergroup.com

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ad pepper media International N.V. Frankenstraße 150 C D-90461 Nuremberg

Phone: +49 (0) 911 929057-0 Fax: +49 (0) 911 929057-157 E-mail: info@adpepper.com www.adpeppergroup.com

Joint stock company (N.V.) Headquarters Amsterdam, The Netherlands Nuremberg office

Prime Standard, Frankfurt Stock Exchange ISIN: NL0000238145 HRB Nuremberg 17591 VAT-ID-No.: DE 210757424

Board of Directors: Dr. Jens Körner, CEO

Our 2017 Annual Report as well as the Interim Financial Reports for 2018 are available in English at www.adpeppergroup.com under: Investor relations / Statutory publications / Financial reports

ad pepper media International N.V. Frankenstraße 150 C D-90461 Nuremberg

www.adpeppergroup.com